(The following statement was released by the rating agency)
Jan 29 - Fitch Ratings has assigned VTB Bank (France) (VTBF) a Long-term Issuer Default
Rating (IDR) of 'BBB', a Short-term IDR of 'F3' and a Support Rating of '2'. The Outlook on the
Long-term IDR is Negative.
RATING ACTION RATIONALE AND DRIVERS
VTBF's IDRs are aligned with those of its ultimate parent, Russia-based Bank VTB
(IDR: 'BBB'/Negative), reflecting Fitch's opinion that there would be a high probability of
support from VTB, if required. This opinion factors in VTBF's high integration with the parent,
its narrow independent franchise, the track record of support to date, common branding and
VTBF's relatively small size compared to VTB's balance sheet.
The taxation treatment of VTBF's profits also provides an incentive for VTB to maintain the
subsidiary as part of the group. Profit distributed to reconstitute subordinated debt owed by
VTBF to VTB is not subject to taxation until VTBF fully reconstitutes the original amount of the
facility (to EUR906m from EUR700m at end-Q312).
Fitch has not assigned a Viability Rating (which reflects a bank's standalone credit
strength) to VTBF, due to its limited independent franchise and significant reliance on the
parent for business origination and funding. VTBF's corporate loan book, investment portfolio
and interbank lending are dominated by obligors from VTB's home market. The loan portfolio is
very concentrated (the top 20 borrowers accounted for 70% of loans, an amount equal to 3.9x Tier
1 capital, at end-Q312), comprising mainly long-term loans to VTB's large corporate customers.
Three quarters of VTBF's funding, including equity, at the same date was sourced from the group.
RATING ACTION SENSITIVITIES
VTBF's IDRs are likely to change in tandem with those of its ultimate parent, Bank VTB. The
latter currently has a Negative Outlook, reflecting the planned privatisation of the bank, and
Fitch's opinion that this will result in a moderately reduced propensity of state support. A
downgrade of VTB's IDRs will result in similar rating action for VTBF.
VTBF's IDRs could also be upgraded or downgraded in case VTB sells the bank, depending on
the strength of the new owner. However, Fitch views the sale of the bank as unlikely in the near